Personal income and spending in October was sluggish, and that’s the charitable interpretation. But any talk of weak growth these days is quickly followed by the word “hurricane,” along with the excuse that the devastating storm that struck the Northeast U.S. in late-October took a bite out of what would have been a more favorable profile for the month. There’s a lot of debate about how much to blame on the weather, if at all. The Bureau of Economic Analysis notes in its income and spending report today that the storm was a factor in some degree that reduced wages and salaries. The implication, of course, is that what nature has taken away the economy will replace down the line. As such, the weather factor is an issue for the future, for good or ill. Meantime, on to the numbers as reported this morning.
Daily Archives: November 30, 2012
There’s Another Recession Out There Somewhere… Now & Forever
Lakshman Achuthan of Economic Cycle Research Institute toured the TV circuit again yesterday to revive and defend his firm’s long-standing forecast that recession risk is high (see interviews on Bloomberg, and Yahoo Finance). He asserted that the recession started several months ago, noting that this past July marks the peak in the current business cycle for the U.S. The supporting evidence for this analysis, he explained, is patently clear in the behavior of three indicators. It all sounds plausible, but there’s plenty of room for doubt too. The main problem is the ambiguity of the model, as it was outlined. Transparency and clarity regarding the underlying process are essential in business cycle analysis, particularly if you’re arguing in no uncertain terms that the forecast is a virtual certainty. Essential, that is, if you’re trying to evaluate the legitimacy of the prediction. Unfortunately, those features were in short supply in yesterday warnings.